Apple Struggles to Gain Traction with iAd

Apple has lowered the minimum spend for its much-hyped iAd product for the second time, reducing it to $300,000 dollars from the $500,000 price point it arrived at in February, having charged its initial launch advertisers $1 million last year.

Speaking with ClickZ, agency executives suggested that change is a reaction to an increasingly competitive mobile ad space, as well as diminishing advertiser demand for the product as the buzz around its launch subsides. In other words, it’s too expensive.

“When you look at the iAd compared with solutions from other players, what Apple is charging represents a significant premium,” commented Dave Marsey, SVP and group media director at Digitas, before suggesting that the reduced minimum spend is “a direct reflection of demand” and “driven by the market.”

Paul Gelb, VP and mobile practice lead at Razorfish proposed that the iAd price tag may have been making life unnecessarily difficult for Apple’s sales teams. “They probably went back and said it was too hard to sell at the price minimums… They’re learning a little more about how media agencies work,” he said.

At launch the iAd attracted a range of major brands eager to capitalize on the media attention surrounding the new product, as well as the progressive HTML5 technology on which it’s based. However, numerous competitors now offer similar rich media solutions at a lower cost – or at least with a lower minimum spend – which appeals to those advertisers still relatively unfamiliar with the mobile channel.

“Apple has a good product, but they need to adapt. They have no choice,” commented Alexandre Mars, head of mobile at ad holding company Publicis. “The iAd is just one product out there, and if agencies can get the same for less they will take it for less,” he continued, referring to offerings from other ad networks and providers. “I think Jobs wanted something very high end and premium… but the Apple brand on the front door is not enough,” he added.

Even as it struggles to set itself apart, iAd may still have a significant advantage over its competitors when it comes to targeting data. At launch the company promised the ability to serve ads to specific users based on their iTunes and App Store behavior – an appealing opportunity to most advertisers and agencies.

According to Marsey, Apple has yet to exploit that asset to its full potential, and targeting opportunities across the network remain largely nascent. He maintained, however, that the product continues to show potential. “Apple just needs to listen to the market and home in on what they’re selling and the targeting they can bring to the table. It’s going to take some time,” he said.

To help further its sales efforts Apple is also investing more heavily in its iAd sales operations. Marsey said new people have already been added to its Midwest sales teams, and Gelb suggested its staff is becoming increasingly approachable and eager to discuss what needs his agency has from the product. Historically Apple has been criticized for its attitude towards agencies, specifically around creative, which it initially insisted on handling in-house.

Despite that progress Marsey suggested the company is still learning how to play in the media space, having relied initially on the strength of its brand to open agency doors. “When Apple calls that’s a meeting you’re always going to take, but now that attitude has passed they still need to perfect their selling strategies. They haven’t done that well enough yet,” he said.